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Furmanite Corp. Reports Operating Results (10-Q)

November 07, 2012 | About:
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10qk

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Furmanite Corp. (FRM) filed Quarterly Report for the period ended 2012-09-30.

Furmanite Corporation has a market cap of $184.3 million; its shares were traded at around $4.93 with a P/E ratio of 17.6 and P/S ratio of 0.6. Furmanite Corporation had an annual average earning growth of 55.3% over the past 5 years.

Highlight of Business Operations:

For the nine months ended September 30, 2012, consolidated revenues decreased by $1.1 million, or 0.5%, to $233.3 million, compared to $234.4 million for the nine months ended September 30, 2011. Changes related to foreign currency exchange rates unfavorably impacted revenues by $4.0 million, of which $3.5 million and $0.5 million were related to unfavorable impacts in EMEA and Asia-Pacific, respectively. Excluding the foreign currency exchange rate impact, revenues increased by $2.9 million, or 1.2%, for the nine months ended September 30, 2012 compared to the same period in 2011. This $2.9 million increase in revenues consisted of an $11.2 million increase in the Americas but were substantially offset by decreases of $7.6 million and $0.7 million in EMEA and Asia-Pacific, respectively. The increase in revenues in the Americas was primarily related to increases in off-line services, which included volume increases in on-site machining and valve repair services of approximately 15% when compared to revenues in the same period in 2011. The decrease in revenues in EMEA was primarily attributable to decreases in off-line services, which included volume decreases in valve repair, on-site machining and bolting services of approximately 19% when compared to revenues in the same period in 2011, as the Companys central European locations within the EMEA region

For the three months ended September 30, 2012, consolidated revenues decreased by $2.7 million, or 3.5%, to $75.6 million, compared to $78.3 million for the three months ended September 30, 2011. Changes related to foreign currency exchange rates unfavorably impacted revenues by $1.3 million, of which $1.2 million and $0.1 million were related to unfavorable impacts in EMEA and Asia-Pacific, respectively. Excluding the foreign currency exchange rate impact, revenues decreased by $1.4 million, or 1.8%, for the three months ended September 30, 2012 compared to the same period in 2011. This $1.4 million decrease in revenues consisted of decreases of $3.5 million and $2.7 million in EMEA and Asia-Pacific, respectively, which were partially offset by increases of $4.8 million in the Americas. Revenues in the recently completed quarter were negatively impacted by weather related issues in the Americas as well as the deferral of certain work expected to be completed in the third quarter of 2012. The increase in revenues in the Americas was primarily due to increases in off-line services, which related to volume increases in heat treatment, valve repair and on-site machining services of approximately 31% when compared to revenues in the same period in 2011. The decrease in revenues in EMEA was primarily related to decreases in off-line services and primarily related to volume decreases in valve repair services of approximately 16% when compared to revenues in the same period in 2011. The decrease in revenues in Asia-Pacific was primarily attributable to decreases in off-line services, which related to volume decreases in bolting, on-site machining and valve repair services of approximately 40%, when compared to revenues in the same period in 2011.

For the nine months ended September 30, 2012, operating costs, including $0.2 million of restructuring costs, increased $6.2 million, or 3.9%, to $166.9 million, compared to $160.7 million for the nine months ended September 30, 2011. Changes related to foreign currency exchange rates favorably impacted costs by $3.1 million, of which $2.8 million and $0.3 million were related to favorable impacts from EMEA and Asia-Pacific, respectively. Excluding the foreign currency exchange rate impact, operating costs increased $9.3 million, or 5.8%, for the nine months ended September 30, 2012, compared to the same period in 2011. This change consisted of an $10.9 million increase in the Americas but was partially offset by decreases of $1.2 million and $0.4 million in EMEA and Asia-Pacific, respectively. The increase in operating costs in the Americas was primarily related to higher material and labor costs of approximately 13% when compared to the same period in 2011, which were primarily attributable to the increase in revenues, however, were disproportionate to the increase in revenues due to lower than expected margin realization on certain jobs. The decrease in operating costs in EMEA was associated with moderate reductions in labor costs of approximately 4% but were partially offset by higher material costs when compared to the same period in 2011. These cost reductions, however, were not consistent with the decrease in revenues due to low margin realization, particularly in the first half of 2012 due to the continued challenges within the segments central European locations. The operating costs in Asia-Pacific decreased slightly compared to the prior period due to lower material costs but were partially offset by increases in labor costs, which were associated with the higher revenues in Australia.

For the three months ended September 30, 2012, operating costs increased $2.4 million, or 4.5%, to $56.2 million, compared to $53.8 million for the three months ended September 30, 2011. Changes related to foreign currency exchange rates favorably impacted costs by $1.1 million, of which $1.0 million and $0.1 million were related to favorable impacts in EMEA and Asia-Pacific, respectively. Excluding the foreign currency exchange rate impact, operating costs increased by $3.5 million, or 6.5%, for the three months September 30, 2012, compared to the same period in 2011. This change consisted of a $4.7 million increase in the Americas which was partially offset by decreases of $0.7 million and $0.5 in EMEA and Asia-Pacific, respectively. The increase in operating costs in the Americas was primarily attributable to an increase in labor and material costs of approximately 20% and was partially associated with the increase in revenues when compared to the same period in 2011 as well as the lower than anticipated margins on certain jobs and the transitional effects and integration efforts associated with a late second quarter acquisition. In EMEA, the operating costs decrease was primarily related to a decrease in labor costs of approximately 9% when compared to the same period in 2011. The decrease in operating costs in Asia-Pacific was related to decreases in labor costs and travel expenses of approximately 8%, associated with decreases in revenues, when compared to the same period in 2011.

The Company committed to certain cost reduction initiatives in the first half of 2010 and in the second quarter of 2012 in order to more strategically align the Companys operating, selling, general and administrative costs relative to revenues. As of September 30, 2012, the costs incurred since the inception of these two cost reduction initiatives totaled approximately $4.6 million. During the nine months ended September 30, 2012, the Company incurred $0.8 million in restructuring charges related to the 2010 and 2012 cost reduction initiatives and made cash payments of $1.2 million related to these initiatives. As of September 30, 2012, the remaining reserve associated with these initiatives totaled $0.4 million with estimated additional charges to be incurred of approximately $2.1 million, all of which are expected to require cash payments. Total workforce reductions for the 2010 and 2012 cost reduction initiatives included terminations for 100 employees in the Companys EMEA segment.

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